Investment Research — General Market Conditions

20 July 2010

Danske Daily
Markets overnight
The bout of weak US data continues with the NAHB housing market index disappointing with a 14 reading (16 expected). Furthermore, the positive earnings surprises appear to have lost some strength (e.g. Texas Instruments missing expectations slightly), though overall Q2 earnings have so far come out above expectations – helping risky assets perform against the backdrop of slowing global growth. US stocks recovered; Asian markets are higher overnight. US stocks rebounded from Friday’s big sell-off with the S&P500 index gaining 0.6%. Risk sentiment has improved further in Asia overnight where only the Japanese market is trading in red. Longer dated US treasuries reversed past days’ bullish trend as rebounding stock markets offset weak housing data. The 10-year yield is close to 5bp higher, while the 2year is broadly unchanged at 0.59%. HUF faced further pressure in late trading; EUR/USD is failing at 1.30. The Hungarian Forint that came under pressure after the breakdown of EU/IMF loan negotiations during the weekend, saw increased pressure from a strong EUR yesterday – EUR/HUF rising above 290. EUR/USD is still flirting with the 1.30 level. Reserve Bank of Australia minutes of the July meeting (when the cash rate was left unchanged at 4.50%) together with improved risk sentiment have boosted AUD overnight – AUD/USD gaining more than 1% to trade close to 0.88. The minutes did raise concern about the US/China slowdown however, which means that while the bank maintains its tightening bias, further hikes are not right around the corner. The OIS market prices a 23% chance of an August hike. Market movers today:

USD: Housing starts and building permits (14:30 CET) CAD: Bank of Canada meeting – 25bp hike expected (15:00 CET) Q2 earnings (incl. Goldman Sachs, Apple, and Yahoo)

Market overview
07:30 S&P500 (clo se) S&P500 fut (chng fro m clo se) Nikkei Hang Seng 17:00 US 2y gov US 10y gov iTraxx Europe (IG) iTraxx Xover (Non IG) 0.58 2.94 117 442 1071.3 1065.3 9324.6 20365.7 07:30 0.59 2.97 121 543
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1 day +/-,%
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0.60 0.14 -0.89 1.37 +/-, bp 0.8 3.0 4.5 #### +/-, % 0.00 0.30 0.12 -0.33 0.17 -0.07 USD -0.90 0.33

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Global Daily
Today brings further insight into the state of the US housing market. Yesterday saw the release of a weak sentiment indicator and today could bring further indications of a slowdown, as the expiration of the home buyer tax credit in April is weighing on activity. We look for housing starts to have declined 4.6% m/m in June and for building permits to have only moved marginally higher to 580k. Bank of Canada expected to hike by 25bp; watch out for a softer tone. A 25bp hike to 0.75% (the second since monetary policy was first tightened on 1 June) is widely expected in the market, whereby focus will be on the accompanying statement. With recent soft US data and increased macro uncertainty the risk is of a softer-than-expected statement, which could weigh on CAD if indications are that the 109bp of expected tightening currently priced on the 12-month horizon will not be met. JPY continues to frustrate the bears. Those looking for the yen to be the big loser as global growth recovered (while Japan was once again left behind) have been sadly disappointed this year. While USD/JPY moved back above 87 yesterday, persistently low global rates imply that improved global growth expectations have not yet led to a JPY depreciation. We maintain the view that higher rates in the US are needed to see JPY correct back lower, but that this is likely to be more of a theme for H1 2011.


1.297 86.740 1.36 0.853 9.521 8.17

1.297 87.000 1.37 0.850 9.537 8.16

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Oil Brent, USD Gold, USD

76.4 1179.8

75.8 1183.7

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Note: * The iTraxx Europe Index show the spread development for the most liquid investment grade CDS contracts in the euro credit market. **The iTraxx Europe Crossover show the spread development of the most liquid non-investment grade CDS contracts in the euro credit market.

Source: Bloomberg

From 12-30 July Danske Daily will be published in a reduced summer edition

Scandi Daily
No key data out of Scandinavia today apart from earnings (incl. TeliaSonera).
Senior Analyst Kasper Kirkegaard +45 45 13 70 18

Danske Daily

Key figures and events
Tuesday, July 20, 2010
7:00 8:00 10:30 12:15 14:30 14:30 15:00 16:00 OTH JPY DEM GBP GBP USD USD CAD USD Earnings - Whirlpool, Goldman Sachs, Apple, Yahoo Leading Economic Index, final PPI Major banks mortgage approvals CBI Industrial Trends Survey Housing starts Building Permits Bank of Canada announce key policy interest rate Fed's Tarullo (voter, neutral) speaks Index m/m|y/y 1000 Index 1000 (m/m) 1000 (m/m) May Jun Jun Jul Jun Jun 565 (-4.6%) 580 (0.1%) 0.75% 0.2%|1.2% 52 -24 577 (-2.8%) 570 (-0.7%) 0.75% 98.7 0.3%|0.9% 51 -23 593 (-10.0%) 574 (-5.9%) 0.5% Period Danske Bank Consensus Previous


20 July 2010

Danske Daily

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20 July 2010

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